Is farmland the next bubble?

Commentaries on economics and technology.
March 22 2011 5:40 PM

The Next Bubble: Farmland

All the usual signs are in place for a continued increase in the price of agricultural real estate.

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The housing-price boom of the 2000s was little more than a construction-supply bottleneck, an inability to satisfy investment demand fast enough, and was (or, in some places, will be) eliminated with massive increases in supply. By contrast, there has been no increase in the supply of farmland, and the stories that would support a contagion of enthusiasm for it are in place, just as they were in the 1970s in the United States, when a similar food-price scare generated the century's only farmland bubble.

Still, we must always bear in mind the difficulty of forecasting bubbles. And, for daring investors, it is not enough to find a bubble to pile into. They must also try to determine when to cash out and put their money elsewhere.

This article comes from Project Syndicate.

Robert Shiller, professor of economics at Yale University and chief economist at MacroMarkets LLC, is co-author, with George Akerlof, of Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism.